- BRICS nations are increasingly trading in local currencies, with 92% of transactions between Russia, China, India, and Iran now conducted without the U.S. dollar.
- Progress is being made on the BRICS stablecoin, UNIT, which aims to further facilitate trade within the block.
The tide is turning in international finance as the BRICS nations—Brazil, Russia, India, China, and South Africa—alongside members of the Shanghai Cooperation Organization (SCO), intensify their shift away from the U.S. dollar in trade transactions. This movement, often referred to as dedollarization, represents a significant pivot in global economic strategies.
Decoupling from the Dollar
The drive towards dedollarization has been gaining momentum, as evidenced by recent statements from Dmitri Volvach, the Russian Deputy Minister of Economic Development. Volvach highlighted a striking increase in the use of local currencies for trade among the SCO members, from 40% in 2022 to a remarkable 92% today. This shift predominantly involves powerhouse economies such as China and Russia, which have already started settling bilateral trades using the Chinese Yuan over the past year.
The SCO, established in Shanghai on June 15, 2001, originally included Russia, Kazakhstan, Kyrgyzstan, China, Tajikistan, and Uzbekistan. Over the years, it has expanded to include around 26 countries, encompassing both full members and observer states. The organization’s increasing focus on using local currencies is a strategic response to various global pressures, including trade disputes and geopolitical tensions, which have underscored the vulnerabilities associated with reliance on the dollar.
The Rise of UNIT
In a parallel effort to reinforce their economic independence, the BRICS nations are progressing in developing a proprietary currency, the UNIT. This new stablecoin initiative is envisioned as a key component in the bloc’s broader strategy to create a self-sufficient financial ecosystem. The UNIT is expected to be backed by a basket of currencies and gold, ensuring its stability and reliability in international trade.
The concept of UNIT emerged from the necessity to facilitate smoother and more stable transactions within the bloc, bypassing the fluctuating exchange rates that often complicate trades in local currencies. This initiative is part of a broader push to establish digital Central Bank Digital Currencies (CBDCs), which are already under development in several member countries, including China, India, and Russia.
As the BRICS and SCO nations continue to build up their gold reserves and advance their technological infrastructure, the foundation for UNIT solidifies. While specifics of the new currency are yet to be fully disclosed, the strategic accumulation of gold and the detailed planning suggest that the implementation of this new currency system could soon become a reality, reshaping international trade dynamics.